(Super. Ct. No. 30-2010-00431832) Appeal from a judgment of the Superior Court of Orange County, Frederick P. Horn, Judge.

The opinion of the court was delivered by: Bedsworth, J.

CERTIFIED FOR PUBLICATION

OPINION

Affirmed. Motion for judicial notice. Motion granted.

I. INTRODUCTION

Taxpayers living in Huntington Beach have been paying two taxes which taxpayers in next door Sunset Beach haven't. First, Huntington Beach taxpayers have been paying a utility tax of five percent. Second, they have been paying a "retirement property tax" of about $15 per each $100,000 of assessed valuation, on top of Proposition 13's one-percent limit, for Huntington Beach pension costs incurred prior to the passage of Proposition 13 in 1978.*fn1

Until now the taxpayers of Sunset Beach have been spared those taxes. Sunset Beach is a relatively small strip of land, consisting of about 133 acres, which, for over a century, has been an unincorporated part of the County of Orange. Because of this small size, Huntington Beach was able, with the approval of Orange County's local agency formation commission (OC LAFCO), to annex Sunset Beach without a vote under California's "island annexation" statute. (See Gov. Code, § 56375.3.*fn2

Another California statute provides that any territory annexed to a city shall be subject to that city's previously authorized taxes. (§ 57330.) So, with the annexation, Sunset Beach residents have now found themselves subject to the two additional taxes levied on taxpayers in Huntington Beach for which no one in Sunset Beach voted.

A group of Sunset Beach residents calling themselves the Citizen's*fn3 Association of Sunset Beach (the Citizens Association) brought this litigation just before the annexation, seeking either to prevent the annexation, or at least to require a vote by the electorate in Sunset Beach to approve the application of the two additional taxes that would otherwise accompany the annexation. Their argument is that Proposition 218 (the Right to Vote on Taxes Act), added to the California Constitution as articles XIII C and XIII D, requires that Sunset Beach residents be given the chance to vote on the two "new" taxes.*fn4 The trial court eventually denied the Citizens Association's petition, allowed the annexation to go through, and the Citizens Association has brought this appeal.

We conclude Proposition 218 was never intended to require votes incident to annexations of territory by local governments. It was intended to prevent politicians from trying to circumvent Proposition 13 by inventing so-called assessment districts which supposedly could impose taxes without any vote of the electorate. Nor does the text of Proposition 218, even liberally construed, require an election on tax differentials in connection with an annexation. Most dispositive are the dual track elections on taxes expressly required by Proposition 218: majority votes for general taxes, supermajority votes for special taxes. If the proponents of Proposition 218 had intended to require votes on annexations whenever there is a difference in the taxes between the annexing territory and the territory to be annexed, they would, at the very least, have made provision for the fact that some of the taxes would require only a majority vote, but other taxes would require a two-thirds vote. None of that is in the text of Proposition 218. We therefore affirm the trial court's denial of the petition brought by the Citizens Association.

II. BACKGROUND

A. The Move to Annex Sunset Beach

Both Sunset Beach and its larger neighbor Huntington Beach got their start in 1904 in response to a railway extension connected with the construction of the Huntington Beach Pier depot. At the time, the land that is now Huntington Harbor (which lies generally behind Sunset Beach to the inland) was marshland. Until Huntington Harbor was developed in the early 1960's, Sunset Beach was almost a literal "island," with train tracks running along the beach, housing tracts built on the inland side of the train tracks, and marshland behind it.

Unlike Huntington Beach, though, Sunset Beach never incorporated as a city, in part due to its relatively small size. Today, Sunset Beach consists of less than 134 acres, tucked into the northwestern corner of Orange County. There are roughly two beach acres for every residential acre. There are about 1200 permanent residents and most of the community is on the ocean side of Pacific Coast Highway. All parties agree the community retains an identity distinctly separate from Huntington Beach.

As an unincorporated county area, Sunset Beach has been receiving a number of its local government services from the County of Orange, including police protection from the Orange County Sheriff's Department. Fire protection has been shared by the Orange County Fire Authority and Huntington Beach's fire department. However, since the 1990's the County of Orange has wanted to pull back from "municipal-type services," thus raising the question of whether Sunset Beach might incorporate as a city on its own or be annexed by nearby Huntington Beach or Seal Beach. A feasibility study prepared in May 2010 to explore the possibility of Sunset Beach incorporating on its own projected total revenue would exceed costs by about 10 percent and found incorporation feasible under three scenarios, albeit each of the three scenarios under consideration contemplated "expanded" utility taxes. Nothing came of the self-incorporation option.

But each California county has its own LAFCO, or "local agency formation commission" to oversee annexations and formations of local governments. (See Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1323-1324 [overview of Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000].)*fn5 As part of the county's general desire to divest itself of municipal-type services, OC LAFCO had been eyeing the possible annexation of Sunset Beach by an adjacent city since at least 2005. Sometime before April 2010, OC LAFCO initiated the idea of having Huntington Beach annex Sunset Beach.

A representative from OC LAFCO acknowledged the "request was not initiated" by Huntington Beach. It came up at a Huntington Beach City Council meeting in August 2010. The Huntington Beach City Council voted to direct its staff to prepare the necessary paperwork for a formal application to OC LAFCO for annexation. Huntington Beach then applied to annex Sunset Beach. OC LAFCO staff recommended approval on December 8, 2010.

The next day the Citizens Association filed this action.

B. The Litigation

The Citizens Association's petition sought a writ of mandate immediately prohibiting OC LAFCO from taking any further action on Huntington Beach's annexation petition. The Citizens Association also sought an order directing OC LAFCO to either reject the annexation petition or impose as a condition "a favorable vote" by the residents of Sunset Beach "in an election pursuant to Proposition 218 regarding imposition of all of the City's special taxes, including but not limited to the utility tax and the property tax override." Lastly, the Citizens Association asked for a preliminary injunction. The trial court granted the preliminary injunction on January 19, 2011, reasoning that the Citizens Association had shown a likelihood of success and would be entitled to some kind of protest proceeding or election "on the annexation or taxation" issue.

But when the matter was considered on the merits after briefing and oral argument in August 2011, the result was different. The court determined Proposition 218 does not apply to "'island'" annexations under the Government Code (specifically section 56375.3). The court further concluded the annexation of Sunset Beach by Huntington Beach would not "involve the imposition, extension or increase of any new general or special taxes." ...

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